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Will the purchase tax increase moderate the increases?
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A quick move to raise the purchase tax from 5 to 8 percent should stop the rush in the real estate market, but do not build on this: "These are populist measures.
The only solution is not to impose barriers but to give benefits "
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Walla!
Real Estate
Wednesday, 03 November 2021, 14:52 Updated: 14:53
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The government housing plan, which was launched at the beginning of the week and includes, among other things, an increase in the purchase tax on a second apartment from 5% to 8%, is intended to moderate apartment prices, with the move expected to materialize within about ten days.
Finance Minister Avigdor Lieberman explained that there were many struggles around the issue, but it was finally decided to raise it to put Brex to the insane rush to buy apartments for investment.
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A populist decision?
Lieberman (Photo: Reuven Castro)
Eyal Apel (Photo: Shirad Nissim)
Architect Eyal Apple claims that the decision is populist and misses the target for which it was set.
"In our experience, a significant portion of investors are involved in purchase group projects or buyers as part of purchase groups. In such projects purchase tax is only on the land component which constitutes 30-40% of the apartment value, so a 2-3% increase will not affect or prevent investors from continuing the deal. ".
Apple explains that because the state does not invest in public housing and / or long-term rental construction, the private market, in the end, is the one that "produces" these apartments, so the problem will not be solved.
"Ultimately, to bring down housing prices the state needs to encourage construction and not put up barriers."
"Do not impose barriers, release them"
According to Apple, some investors may abandon the idea of investing in an apartment, but they will certainly not be an influential majority. "Still in Israel, investing in real estate over the years has proven to be the safest investment," he says. "Essential in the market. If you look numerically, it is usually about buying cheap apartments and not luxury apartments."
Referring to the rental market, Apple explains: "Ultimately the rental market is held by private investors. It is likely that prices here will continue to rise, though not drastically because the increase is relatively small. Always after such an increase there is also an increase in rental prices, but the effect is relatively small. Because the percentage is negligible, even though the rental market is very high.
"The only solution to encourage and increase the supply of apartments in the market is not by imposing taxes and barriers, but by releasing barriers, giving benefits, allowing the market to increase supply, which is the serious problem the market is facing.
After all, every time more taxes are imposed and less constructive barriers are imposed, supply will be lower and prices will rise.
More houses need to be built, the government needs to initiate construction of rental housing in massive quantities.
In addition, tax benefits should be given for a single and first apartment.
Also in the sale of an apartment there is a very high tax and all these barriers need to be lowered, especially for those who do not invest.
If you invest, then you will pay, but in order to improve housing, there is no need to pay taxes. "
Build more, release the stress.
Homes for students in Kfar Melal (Photo: Apple Architects)
Dafna Orbach (Photo: Yossi Zucker)
And maybe the solution is to invest abroad at all? Apple does not think so. "Investment channels abroad are tempting but involve a lot of risks," he explains, "so it is unlikely that small investors will run there. Right now, all over the world there is a lack of clarity on the subject of real estate because of the corona, and meanwhile this is a dangerous market for the small investor. "Buying an apartment in Berlin and the United States is still considered too adventurous compared to an apartment in the periphery that is accessible, and any problem can be treated immediately. This is compared to an apartment abroad, where the market is not known," Apple concludes.
Dafna Orbach from Orbach Halevi Architects explains: "It is important to fight on all fronts and thus calm the market in the investment channel in apartments. This is the core of the solution. The government must be firm and decisive with a comprehensive plan that will lower prices. Creating density, promoting public transport, making the possibility of living in the periphery and working in a prime location relevant. The solution is in everyone together - the Minister of Transport, the Minister of Infrastructure, the Minister of Housing, etc. "They will drop significantly. Only a comprehensive and comprehensive plan will help and cause prices to be sane in the long run and calm the madness of buying apartments."
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